you can do to maximize your net worth:
Take financial inventory. Develop your own net worth statement. Create two columns. In the first column, list your assets, including the fair market value of property, retirement funds, the book value of automobiles, and checking and savings accounts. In the second column, indicate your liabilities, including student loans, mortgage balance, and credit card debt. Subtract the total of column A from column B and you’ll have a figure that represents your financial position. Review your net worth statement quarterly.
Set wealth goals. To achieve your wealth potential, write down some realistic objectives and distinguish between your short-term and long-term goals. Make sure your strategic plan includes homeownership and debt management. In the case of the Smiths, they stuck to their game plan and, as a result, will be able to purchase another property in 2007. To do so, they plan to sell the single-family home first and rent out the townhouse. In the near future, the couple intends to buy another two- or three-flat building. Within the next few years, however, they intend to leverage their real estate holdings to acquire a multi-complex building in the suburbs. “We want to buy the smaller properties first, have them generate money, sell them, and then put that money into something like a 24-unit complex,” says Latrice.
Fully fund your retirement. Max out of your 401(k) plan or at least make a real effort to contribute as a much as you can to employer-sponsored retirement plans. The money will be deducted from your taxable income. After those plans are fully funded, put $3,000 per year into an IRA. Currently, Latrice contributes 10% to her 401(k); Ervin places roughly 5% of his income into his plan. Also, use worksheets and calculators to figure out your retirement income needs.
Save and invest. There’s an old money management maxim: it’s not what you earn but what you keep. To hold on to more of your dollars, give yourself an allowance. By doing so, you can keep track of how much you spend weekly and monthly. Asserts Latrice: “Once we get paid, we give each other $200 each week. That’s $800 a month. If I run out of money that week, I don’t go back into my checking or savings accounts. I may ask to borrow from his $200 if he hasn’t spent it all.”